The Dow Jones Industrial Average (or DJIA) gets its name from Charles Dow, the man who first created it in 1897. In the beginning, Mr. Dow made an index of the 11 most prosperous and most widely traded industrial stocks on the market. Currently, the Dow is made up of 30 stocks from all sectors of the market – not just industrial stocks. The companies in the current Dow index are chosen by the editors of the Wall Street Journal (which is owned by Dow Jones and Company). These stocks are intended to reflect how the largest U.S. companies are doing in the stock market.
Posts Tagged ‘index’
The Dow Jones Industrial Average is…
Wednesday, June 23rd, 2010NASDAQ? DOW? S&P 500? Huh?
Wednesday, October 7th, 2009With so many abbreviations running around the finance world, it’s only natural to be a bit confused.
These terms are often used in the news to give you a sense about the state of the economy. If the DOW is up, it’s a good thing and if it’s down, it’s not so good. But what’s the difference between these terms?
You can basically break them down into two categories: stock exchanges and stock indices. Stock exchanges are where different stocks are bought and sold – similar to a grocery store for household goods. Stock indices, on the other hand, measure a specific segment of the stock market by tracking the stocks of a particular group of companies – you could create indices that track car, agricultural, or computer companies.
NASDAQ is a stock exchange where over 5,000 different stocks are traded, while the DOW and the S&P 500 are stock indices. The DOW focuses on 30 of the largest American companies and the S&P focuses on 500 of the strongest American companies.
By looking at the performance (or daily change in value) of various stock exchanges and stock indices, investors are able to measure the strength of different sectors of the American economy.
An Index is…
Tuesday, June 16th, 2009An index is an estimate of the value of several different properties (such as stocks, bonds, art, commodities, etc.) taken together. In other words, an index is a bunch of different items that are combined and assigned a monetary value. For example, the S&P 500 is an index that tracks 500 individual stocks and translates their performance into one number. So instead of you tracking all 500 of those stocks, you can just look at the S&P 500 to get the gist.
An Index Fund is…
Thursday, June 11th, 2009An index fund is a mutual fund, or compilation of instruments (such as stocks, bonds, housing, art, commodities), that mimic the composition of an index. For example, if the index fund replicates the S&P 500 index, all 500 stocks (in the appropriate percentages) would be in that fund. Because it’s a mutual fund, the monetary value of an index fund is determined at the end of each trading day (as opposed to the price of a stock, which fluctuates throughout the day).